2001 (2) TMI 240 - AT - Central Excise

Summary

Issues Involved:
1. Denial of benefit of exemption notification rates for rail coaches.
2. Misdeclaration and suppression of facts by the appellant.
3. Justification of invoking the proviso to Section 11A of CESA 1944 for demanding duty for the extended period.
4. Imposition of penalty under Rule 173Q(1)/226.

Summary:

1. Denial of Benefit of Exemption Notification Rates:
The appellant, a manufacturer of rail coaches, contested the denial of exemption notification rates as per Notification 452/1986-C.E., dated 20-11-1986. The Collector found that the appellant availed Modvat credit on inputs like oxygen and acetylene gases used in manufacturing rail coaches, violating the notification's proviso that no credit of duty on any inputs should be availed u/r 56A or 57A of the CER 1944. Consequently, the appellant was dis-entitled to the exemption benefit.

2. Misdeclaration and Suppression of Facts:
The Collector concluded that the appellant made a wilful misdeclaration by not reversing the credit on certain inputs and not declaring the stock of inputs with availed credit lying unutilized. This misdeclaration was seen as a mala fide intention to wrongly avail the exemption benefit. The appellant's argument to reverse the Modvat credit was not accepted as it did not fulfill the notification's conditions in toto.

3. Justification of Invoking Proviso to Section 11A of CESA 1944:
The Collector justified invoking the extended period for demanding duty u/s 11A of CESA 1944, citing misdeclaration and suppression of facts by the appellant. The Collector relied on various judgments to support this stance, including the Delhi High Court's decision in Star Paper Mills v. U.O.I. and the Tribunal's decision in Lustre Lampions v. Collector.

4. Imposition of Penalty:
The Collector imposed a penalty of Rs. 15,00,000/- u/r 173Q(1)/226, citing the appellant's failure to strike balances in RG23A Pt. I and the wrongful availment of the exemption. The Tribunal, however, found no reason to uphold the penalty, as the demand of Rs. 7,49,42,342.50 was not sustained on grounds of limitation and in light of the Supreme Court and Larger Bench's rulings.

Final Decision:
The Tribunal directed the appellant to reverse the Modvat credit availed on inputs used in manufacturing rail coaches to be eligible for the exemption rate u/s Notification 452/86. The impugned order was set aside, and the appeal was allowed. The Revenue was permitted to verify the reversal of relevant credits.